Mr Happy all his life has been saving his money in bank deposit; with lower bank deposit rates Mr happy looks for other investment option and comes across Mutual Funds. Mr Happy decides to meet up with MERA fund advisors for understanding the basic concept of Mutual fund and SIP. The conversation between Mr Happy & MERA fund advisor is as follows.

What is a mutual fund

A mutual fund is a common pool of money in which investors put in their contribution to obtain units. This collective amount is then invested by professional fund managers according to the investment objective of the fund. Each fund based on the asset category could invest in stocks, bonds, money market instruments, gold and other similar assets.

The income earned through these investments and capital appreciation realized by the scheme are shared by the investor in proportion to the number of units owned by them.

Types of Mutual fund

Based on the Structure

1. Open End funds- An open-end fund is a mutual fund scheme that is available for subscription and redemption on every business day throughout the year.

2. Closed End funds- An Closed-end fund is a mutual fund scheme that is available for subscription only during the initial offer period and can be redeemed only on maturity. However the Units of these fund would be listed on a stock exchange after the new fund offer, and investors can buy/sell this units in the stock exchange.

Based on the Management Style

1. Actively Managed funds- Fund managers buy and sell investments, attempting to generate higher returns than the benchmark.

2. Passively Managed funds- Funds managers buy an portfolio that tracks benchmark performance.


Based on the asset class

  1. Equity funds- Funds that invest in Equity shares are called Equity funds. They carry the principal objective of capital appreciation of the investment over medium to long term investment horizon.
  2. Balanced Funds- Funds that invest in a mix of Equity shares and debt (fixed income) instruments. They strive to provide both growth and regular income. They are ideal for  medium to long term investors willing to take moderate risk.
  3. Debt Funds- Funds that invest predominantly in rated debt / fixed income securities like corporate bonds, debentures, government securities, commercial papers and other money market instruments. They are best suited for the medium to long-term investors who are averse to risk and seeking regular and steady income.
  4. Other funds- All investments other than traditional asset class (Equity & Bond) are categorized as alternative investments. Mutual funds offers funds in which investor can invest in the alternative assets like gold, real estate etc. we categorize these funds into basket of other funds. These funds have different risk/return profile compared to Equity & Debt funds, thus could fit well in a portfolio context.


Advantages of MF ()

Modes of Investment( )

 Myths & Facts about Mutual fund

 Conclusion: Mutual funds suitable for all investor

Mutual Fund is a professionally managed investment vehicle offering investment option across different asset class like bonds, equity, gold etc. Mutual fund would be the best option for investors who like to invest in different asset class and lacks investment knowledge (MF offers professional management); lacks time (Fund manager takes care); lacks large capital (MF offers diversification benefit even on a small investment)

Mutual fund is suitable for all kinds of investment. Bond funds are suitable for risk averse investors; while investors with risk appetite can look into equity funds.

“One Size Fits all” approach does not work in mutual fund. Appropriate selection of fund would depend on various factors like market condition, investors risk/return trade off, investment horizon, tax and liquidity consideration etc.

Mutual fund offers product for everyone under every market condition; Mutual funds are one of the best investment option while planning for goals be it long term like retirement planning, Kids educational planning or  short tern goals like purchasing house, car etc.